A deduction may also be sought for expenditure charged to a
current asset account in the balance sheet, such as
’prepayments' or ‘deferred expenditure'. In such a case
there is no general tax principle which overrides the accounting
treatment. In particular, the case of Threlfall v Jones [1993]
66TC77 is authority for the view that there is no general tax
principle to the effect that a deduction is available for revenue
expenditure when it is incurred or paid.
This imposes a discipline for trading income purposes which
is a very important feature of the way we compute taxable trading
profit. As a general timing rule it is not possible for the trader
to take a more conservative view for tax than for other purposes.
So, if a company wishes to reduce its taxable profit it has to tell
creditors, shareholders and the stock market the same story.
